Mr Jerry Boltina
Committee Secretary
Portfolio Committee on Agriculture and Land Affairs
Parliament of the Republic of South Africa
P O Box 15
CAPE TOWN
8000
Dear Mr Boltina
ABC SUBMISSION TO THE PUBLIC HEARINGS ON ROLE OF PRIVATE SECTOR IN AGRICULTURAL DEVELOPMENT: 9-10 JUNE 2003
1. Introduction
South African agribusiness is dedicated to working in partnership with government and other social partners to ensure the development of the agricultural sector and particularly to making a real and sustainable contribution to agricultural growth and development in South Africa.
The Agricultural Business Chamber is, therefore, pleased to present an initial document on the role of the private sector in agricultural development initiatives. The aim of this document is to pose practical and attainable initiatives to meet some of the agricultural development challenges facing the sector, based on experiences by agribusinesses in this regard.
This document is not intended to be the final word on the role of the private sector in agricultural development, but rather a position put forward to stimulate further discussion on the topic. We recognise that successful agricultural development depends on all the parties arriving at practical projects and initiatives.
The challenge is not only to create an overarching strategy to facilitate effective participation by agribusiness in agricultural development, but also to design steps to assist stakeholders in the practical implementation of these strategies. The agribusiness sector acknowledges that it must participate with government and other stakeholders to drive such initiatives forward, and appreciates the opportunity to forward some ideas on these important issues.
2. Current agribusiness initiatives: CDI (Co-operative Development Initiative)
As section 21 Company CDI is generally recognized as an effective business linking agent in the new agriculture of South Africa with its mandate jointly formulated two years ago by DGRV and ABC. The mandate defines the integration of economic activity by establishing and promoting linkages between new farmers and their commercial counterparts to enhance the empowerment of historically disadvantaged groups through providing access and capacity to the mentioned participants.
Based on our activity list and the ever -increasing number of interventions involving our network, we have no hesitance in stating that CDI has become a highly successful agric-business linking expert on the South African scene and more in particular with regard to entrepreneurial opportunities and empowerment.
2.1 Profile
Although CDI operates in the agricultural sector where its core business focus is found, it is already most evident that a number of related needs as experienced by previously disadvantaged groups fall within our mandate and as such can practically be accommodated on a self-help basis in the same linking processes. In this respect we think of bulk-buying of selected household commodities, need for certain financial services and solutions, coordinated training, advice and counselling and the like which can be packaged together with agriculture in serving the needs of emerging groups.
CDI in itself is therefore extremely well positioned to firstly identify such opportunities and linking them up with its partners for the sake of business and secondly to be acting as a provider of selected services ourselves. The latter is obviously broadening the scope of the CDI task, however the solid agricultural foundation will remain.
CDI project statistics currently are substantial in numbers and wide in diversity. We have as many as 123 projects recorded of which 14 have shown real linking progress.
2.2 Partnerships
Essentially we collaborate successfully and actively with our initiating partners namely ABC and DGRV, the latter being extremely supportive in both operational and financial terms, as well as their expert knowledge on cooperative policy and practice. The ABC as institution, with its membership capacity and logistical strengths, is a valuable partner, which demonstrates excellent goodwill and participation in emerging agriculture. The involvement and cooperation of ABC members confirm without doubt the recognition of commercial agriculture to the fact that economic integration and empowerment are important parts of our agri-business game plan in South Africa.
Land Bank is found to be synonymous with CDI activities. The access we have to Land Bank directly or through it's established clients is effective with the result that the name of Land Bank is frequently mentioned in linking discussions.
Our networking is growing with established as well as newly created development institutions inside and outside of government. We have extended liaison on national and specifically provincial levels, mostly on a joint basis with ABC members, for example Limpast in Limpopo, MADC in Mpumalanga, CIAMD in Free State, ECDC in Eastern Cape, Wesgro in Western Cape, while agricutural commodity organizations with their more focused aims are similarly connected. CDI has also made a special effort to establish links with the NAFU head office.
CDI relates with a number of government departments on national level namely agriculture, land affairs, trade and industry as well as labour. We are taking part in the policy planning process on cooperative development with DTI and look forward to this much needed policy. In view of the urgent need for cooperative education and training on national level, in addition to the sector approach, CDI has entered into discussions with department of labour and will prepare a submission in this regard. Both the above two processes are done in close collaboration with DGRV due to their expert knowledge on cooperative matters.
Important to mention is CDI's increasing participation in possible links with local authorities through the LED and IDP processes where agriculture often forms the basis of such initiatives. We are of the opinion that this is part of our scope and task to provide business links in supporting entrepreneurial development in local structures.
One of our 2003 focuses is to make more contact with a bigger range of input supply companies to engage them more directly in project opportunities. Similarly, we are identifying an increasing number of private initiatives on business development and CDI is in favour of supporting and engaging such activities.
2.3 Results
The latest CDI statistics show a total of 123 recorded projects, inclusive of 14 with real linking progress. Of these as many as 25 projects have been linked with members of the ABC in all the provinces of the country, confirming the recognition of commercial agriculture to economic integration and empowerment as important ingredients of the agri-business future plan in South Africa. We accept the fact that ABC members and others have many more such projects, which are not necessarily on CDI books.
CDI uses a number of promoters as expert contact persons in the various provinces and our organization indeed benefits from this valuable resource of eleven (11) specialists.
Due to the process driven by CDI, the networking often results in a long-winded series of discussions from which numerous spin-offs find their way to one or more linking partner. In this manner CDI is convinced that it continuously contributes to emerging agri-business development in the country.
2.4 Pitfalls
Unfortunately we experience for some considerable time a lack of support from the national department of agriculture in acknowledging the CDI proposal for appointment as linking agent. Our proposal aims at the point of delivery, on behalf of the department, of transformation opportunities in line with the sector plan for agriculture, however for unknown reasons the leadership of the department does not share this vision and fails to communicate their reaction to us.
In addition CDI is confronted with serious delays in LRAD applications on a number of projects, which unfortunately brings about financial damages and a lack of public confidence in LRAD itself. We are aware of the apparent insufficient budget and would support any process to rectify and install trust in the merits of the program. It might be timeous for government to consider the out-contracting or privatisation of LRAD in order to obtain more desired results in terms of national objectives.
2.5 The Way Forward
CDI has in the past two years only touched on the vast potential, and urgent need, of agribusiness linking. CDI will continue to present and manage its activities in such a manner that the organisation continues to grow into an effective and flexible provider of business value.
3. Future initiatives
The Agricultural Business Chamber recognises the serious backlog in training and skills in previously disadvantaged communities. This backlog is particularly severe in rural areas in which AgriBusinesses operate. The Agricultural Business Chamber recognises the urgent imperative to equip all members of society with the necessary skills and training to become economically active in order to eliminate the inequalities in our society and create a sound basis for economic growth and prosperity.
The Agricultural Business Chamber is engaging with the Umsobomvu Youth Fund, the University of Pretoria and EPA to establish an agribusiness internship program. This program endeavours to give unemployed graduated youths the opportunity to enhance their skills by continuing their education and to participate in internship programs in selected agribusinesses. The program will consist of three fundamental activities namely the training of candidates at the University of Pretoria in agribusiness; experiential learning through internships at selected agribusiness and employment through placement of the candidates in agribusinesses. They will gain additional academic skills, improve their leadership skill and, through proven experience in agribusiness management, improve their employability.
The program will identify, train and place 40 youths per year for the next three years. Currently this program is funded by the Umsobomvu Youth Fund, but is expected to expand its funding base to include local and international donors.
4. Further imperatives
Agricultural development should not be seen in isolation from other challenges facing rural areas. These include the lack of capital accumulation; public works initiatives; basic services and infrastructure and support to SMME’s.
Previously disadvantaged groups, and especially those in rural areas, suffer from a severe lack of capital accumulation. This makes it difficult for these groups to participate effectively in the mainstream economy. Sound financing mechanisms are therefore necessary to fund agricultural development. It is critical to explore all available and potential resources to fund agricultural development. These funds should be utilised to fund mechanisms to ameliorate the inherent risks of agricultural production, loan and other financial guarantees, and to leverage existing equity. This will further an environment in which transactions can comply with the principles of sound business practise and sustainability. In the light of these imperatives it is important to revisit the funding of important programs such as LRAD.
It is clear that the government is committed to large-scale public works initiatives. These initiatives are important as it provides a small income for the unemployed and an opportunity to enhance their skills and work experience. The agribusiness sector believes that it can play a bigger role in the implementation of public work programmes in rural areas. Closer collaboration between government and the agribusiness sector will create a forum that can draw from the expertise inherent in government, agribusiness and labour. Such a forum would be instrumental in identifying projects that are multi-faceted, demand driven and economically rational to the benefit of rural communities.
The provision of basic services and infrastructure remains one of the most important barriers to the effective participation of rural communities in the mainstream economy. The agribusiness sector recognises that one of the major focuses of the 2003/2004 budget is to alleviate poverty through the provision of basic services and infrastructure. Public private partnerships are crucial to guide and facilitate economically optimal allocation of scarce resources, especially in rural areas where the demand for such development is particularly severe. Such an initiative will enhance the institutional capacity and intelligent application of resources.
Small business (SMME) is the backbone of any economy. Effective regulation of business practise is important in a well-managed economy. However, regulation that exists without the necessary checks and balances can create as many problems as it provides solutions. The transaction costs incurred by small businesses in complying with regulation is often disproportionally high. Serious consideration should be given to measures to reduce the regulatory burden on small businesses.
5. Conclusion
Agricultural development should be planned and implemented with the aim of increased and sustained economic growth. The strategy should be broad based and include as many rural communities as possible. Sound business principles should be adhered to in the design and implementation of these programs.
Participative project identification and planning constitute a first step towards viable implementation. Win-win situations should be identified as role model cases. A development-with-growth approach should be followed to ensure the long-term sustainability of these initiatives.
Skills development is a necessary but not sufficient component of agricultural development. The development strategy should be multidimensional and inclusive to assure, amongst others, access to a range of services to facilitate stakeholder participation in the economy. Mechanisms to determine priorities for financing, probably with substantial government input, needs to be investigated.
Economic growth, sustainability and quality are the responsibility of each and every South African. We will not be able to achieve these objectives in isolation from each other. The members of the Agricultural Business Chamber believe that participatory planning and joint implementation is the key to prosperity for all South Africans.